Guelph ponders how it might pay for damages in the Urbacon lawsuit ruling

City hall contractors

Mercury file photo

The City of Guelph is wondering how it might pay damages over a court ruling this week that it wrongfully fired the general contractor first hired to build its new city hall complex. The construction project is pictured in this April 17, 2007 file photo.

City hall construction

Mercury file photo

The City of Guelph is wondering how it might pay damages over a court ruling this week that it wrongfully fired the general contractor hired to build its new city hall complex. The construction project is pictured in this Sept. 24, 2008, file photo, just after the City terminated the builder's contract.

GUELPH—The City of Guelph may tap municipal reserve funds if it's obliged to pay damages over the court decision this week that it wrongfully dismissed the original general contractor hired to build its new city hall complex.

According to City of Guelph deputy solicitor Scott Worsfold, the City has engaged in preliminary examinations of this issue and "identified various reserves and reserve funds that could be used" to cover possible damages that may be awarded in the case to Urbacon Buildings Group Corp.

On Monday, an Ontario Superior Court ruling found the City of Guelph had wrongfully dismissed Urbacon from the oft-delayed project in 2008.

The court has yet to issue its reasons for the decision and the municipality has said an appeal of the ruling might be considered upon its review of the reasons.

The damages in the case are yet to be resolved. Worsfold said if the City of Guelph comes not to appeal the ruling and or to successfully overturn it, it would seek to try to settle the damages out of court. If such efforts came about and failed to achieve a settlement, a separate trial just in relation to damages is slated to commence in October.

"Without knowing the amount of damages the City (might be) obligated to pay, it is difficult to specifically say how the City would fund them," Worsfold stated.

He advised the municipality has also identified funding sources related to paying damages in this case that "would require repayment over an extended period of time.

"Once the amount is determined, staff would require Council approval to access the identified funding sources as well as agreement on any repayment that may be required."

Earlier this week, Worsfold reportedly told the Guelph Tribune that insurance coverage would be not be a source the municipality could use to pay possible damages.

Urbacon filed a $19-million wrongful dismissal suit against the city in connection with the project and the city followed with a $5-million countersuit.

At trial, the company asserted that a litany of change-orders made by the municipality were the prime cause for the project to be behind schedule. Trial testimony also revealed that tensions between city and company officials had been high for some time before the municipality abruptly fired the builder.

The court has asked the two sides to submit what their legal expenses were in related to the litigation.

Worsfold asserted that while this matter remains before the court the city's costs are considered privileged and won't be made public.

"Once the litigation is complete, the City would be able to release information on overall costs regarding the litigation," he stated, via email.

Guelph Coun. Cam Guthrie, who was not on council at the time of the contract being issued to Urbacon nor at the time the contract was terminated, has stated the legal bill will be "huge."

Guthrie, who is running for mayor, suggested the legal bill and legal fight with Urbacon could have been avoided through working better with the contractor.